Simon Roue and Laura Sant explain the UK Self Assessment tax return system in plain English.

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is approaching fast, and HMRC is significantly increasing its messaging around the change. For many sole traders and landlords, this will represent the biggest shift in personal tax compliance in decades.

In Episode 16 of the Tax Compass Podcast, Simon Roue and Laura Sant unpack what MTD ITSA really means, who it applies to, and where people are most likely to be caught out.

This episode is particularly relevant if you want clarity without unnecessary technical jargon, and reassurance that you’re not missing something critical.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (often referred to as MTD ITSA) is a new system being introduced by HM Revenue & Customs that will require certain taxpayers to:

• Keep digital records
• Use HMRC-approved software
• Submit quarterly updates instead of one annual Self Assessment return

It is separate from Making Tax Digital for VAT, which has already been in place for several years.

When Does MTD ITSA Start?

The rollout is phased:

• From 6 April 2026 – if your turnover exceeds £50,000
• From 6 April 2027 – threshold reduces to £30,000
• From 6 April 2028 – threshold reduces further to £20,000

Importantly, these thresholds are based on turnover (income received), not profit.

If you have multiple income sources such as self-employment and rental income, they are added together when assessing whether you are in scope.

Who Does It Apply To?

MTD ITSA applies to:

• Sole traders
• Landlords with UK rental income

It does not currently apply to:

• Partnerships
• Limited companies
• People whose income falls below the relevant thresholds

In the episode, we also discuss specific groups who may fall outside the system for now, including certain non-resident landlords without a UK National Insurance number and those who are digitally excluded.

What Does Quarterly Reporting Actually Mean?

One of the biggest concerns we hear is around quarterly reporting.

In practice:

• Quarterly submissions are unadjusted and broadly cash-based
• You are not preparing full accounts every three months
• Final tax adjustments (capital allowances, accruals, reliefs) are still done at year-end

However, the administrative burden will feel very real for anyone who hasn’t previously kept digital records, particularly landlords and those below the VAT threshold.

Why Landlords Are Feeling the Pressure

For landlords, MTD ITSA adds another layer of compliance at a time when:

• Mortgage interest relief is restricted
• Regulation is increasing
• Administrative obligations are already high

In the podcast, we explore why MTD ITSA may accelerate the trend of landlords exiting the market and why many will question whether small or marginal rental profits are worth the effort.

What About Non-Residents and International Tax?

For non-UK residents, MTD ITSA focuses only on UK-taxable income, such as UK rental profits or UK self-employment.

However, complexities arise where:

• The remittance basis or the new foreign income and gains regime applies
• Overseas income needs to be quantified but not taxed

This is an area where specialist advice is critical, and it’s one of the key themes discussed in the episode.

Key Takeaway

Making Tax Digital for Income Tax is not just a technical change. It’s a fundamental shift in how individuals interact with the UK tax system.

The earlier you understand whether it applies to you, the more control you keep over:

• Compliance
• Costs
• Cash flow
• Peace of mind

Listen to Episode 16 of the Tax Compass Podcast to get clarity and confidence, so you pay the right tax in the right place at the right time.

If you want tailored advice on how MTD ITSA affects your situation, especially if you’re a landlord, non-resident, or globally mobile professional, LSR Partners can guide you through the changes calmly and strategically.

Contact LSR Partners today to speak with our expert team and pay the right tax, in the right place, at the right time.